Are you “that” company?
Summary
It’s easy to look at headlines and imagine that all tech workers are headed back to the office. While some part of this assumption may be true, the narrative deserves more nuance.
Most RTO stories come from the big tech firms. Large as they may be, they don’t represent the majority of the tech industry.
Many large companies have massive real estate ownership. It’s hard for them to leave these assets unused, while employees work remotely.
Publicly traded firms make many decisions including those to return to the office, to send messages to their shareholders. Small, privately owned firms needn’t engage in such posturing.
Several small firms look up to the big boys and employ copycat policies. However, if they play by the same rules as the established brands, they have no differentiation to attract top talent.
Since smaller firms can’t always out pay or “out brand” the bigger companies, they must consider location independence as a differentiator that most tech workers value.
Over the last few weeks, I’ve met a few friends each of whom have asked me about my work patterns. Each time I’ve told them I work remotely, they’ve expressed surprise. “Still working remotely?”, they ask. “Aren’t IT companies calling employees back to the office?”.
I don’t know how long I will keep working remotely. This blog doesn’t represent the views of my employers and it’ll be hard to predict what location strategy our C-suite will prefer; especially while we’re in an economic slowdown. But my predictions and personal preferences aside, it’s an interesting exercise to unpack my friends’ thoughts. It’ll be naïve to deny that there’s a visible momentum to “return to the office”. But how much of that momentum should make a difference to you and your company? That’s literally, a million-dollar question.
There’s tech and then there’s tech
You know that I’m an IT worker in India. Much of what I’ll tell you applies to the IT industry in India, but with some thought, you can extrapolate my argument to your country or region. So first, let’s understand how big this industry is. Fair warning, this isn’t a research paper, so the numbers I’ll share are approximate.
In India, IT is a major industry. It employs about five million workers. But if you ask people to name the biggest IT companies, they’ll name five, which for better or worse, go by the acronym WITCH - Wipro, Infosys, TCS, Cognizant and HCL. Between these companies, they employ 1.35 million workers in India - TCS being the largest at 450,000 employees and HCL being the “smallest” at 150,000 employees. All these companies primarily provide IT services.
The other big companies are the usual suspects. These are the big boys of tech; earlier known as FAANG and who I now refer to as TAMMANA - Tesla (for Twitter, now X), Alphabet, Meta, Microsoft, Amazon, Netflix and Apple. Between them, they employ about 36,500 people. Alphabet, Amazon, and Microsoft employ about 10,000 people each and the remaining companies in this list employ smaller numbers of people, with Netflix making a token presence at 500 employees.
WITCH and TAMMANA companies don’t employ most Indian IT workers
Why am I telling you this? Here are a few takeaways.
Most industry observers look at these big companies as bellwethers. Because of their brand value and their size, it’s easy to draw the observation that whatever they do, the rest of the industry is also doing.
Many leaders look up to these companies as the firms they’d like to be in the future. So, at times you’ll see copycat actions. For example, if you’ve spent years admiring everything Amazon does, then it’d be rather dissonant to not follow their lead when they round people back into the office.
And yet, we must all realise that these 12 big companies are nothing like the rest of the industry.
Aside from these behemoths, there are 25,000 IT companies in India.
Together, those 25000 companies employ about 3.65 million people.
A simple average will tell you that the average IT company employs about 145 workers. Netflix - the smallest of the big boys - employs 3.5x that number of people!
So the next time you read an RTO story in the press, ask yourself if the story comes from 12 big boys or from 25,000 companies that represent the rest of the industry. That reflection will help you differentiate a sensational headline from the actual story.
The unreal estate of tech companies
Back in the day, I worked for one of the WITCH companies. I spent a lot of time at one of their training campuses which they’d built over 350 acres. Between all of the WITCH companies, they own about 10,000 acres of real estate in India. TCS tops out at about 3,000 acres and Infosys and HCL are at the “bottom” of this list with 1500 acres. Let those numbers sink in for a bit. This is real estate that they own. In comparison, DLF, India’s largest real estate company, manages only 3,000 acres of real estate.
Even the global TAMMANA big boys own a lot of real estate in India. Not as much as the WITCH, but at 100-odd acres, it’s a lot of space. Global players must also make global decisions. We must look at those 100 acres in relation to the amount of real estate these companies own globally ––32,000 acres! With 12,000 acres of ownership, perhaps Microsoft is as much a real estate company as it is a tech company.
If you build and own a 350-acre campus, would you be comfortable leaving it empty, while employees work remotely? It’s hardly surprising that companies with deep real estate investments eventually call people back to the offices. They can’t let out their huge campuses to other companies. They’ve already incurred this capital expenditure.
In contrast, many of the smaller companies amongst the 25,000 other IT firms, don’t own any real estate. They lease their offices. It’s an operational expense, which if they can eliminate, adds to their bottom line. They aren’t real estate companies. These firms operate as pure tech firms. They can be flexible with their location strategy decisions.
I must add that long-term leases can make companies behave the same way as they would if they owned the premises. So can special tax breaks like the ones India provides for companies that operate in special economic zones or SEZs. But for now we'll steer clear of those nuances.
Public companies must manage optics
Capitalism is a brutal system. Markets don’t care about warm and fuzzy concepts such as inclusion, work-life balance or employee well-being. Revenues and profits are the only things that matter. In a recessionary economy, when a publicly traded company doesn’t make as much money as the market would like, it must manage the market’s perception. It’s like telling shareholders, “We know we didn’t do as well as you’d have liked, but here are some actions we’re taking and so we’d like you to stick with us.”
Much as we may hate to admit it, one of the easy ways to placate shareholders is to tell them how hard you’re squeezing your workers. In a capitalist economy, workers are not human beings. They’re “resources”. The market must get the impression that you’re making the most of these resources. How? Well, choose the narrative you like.
Companies decide to “restructure”; which is often a euphemism for layoffs. The message is that you’re doing more with less.
Some employers may not give out pay hikes despite inflationary pressures. The message to employees is to be grateful for their employment. The message to the market is that you’re being fiscally responsible.
Markets give you a long rope if they believe you’re an innovative firm. If you can build a narrative that innovation happens when people are together in the same place and you already own facilities to bring them together, then you can take that story to the market. The hope is that the market recognises your effort to be innovative and sticks with you.
I’m not placing any value judgments on these decisions. I’ve invested in many of these publicly traded companies, so I’m a part of the problem, even if I identify myself as a milquetoast in the grand scheme of things.
The point I’m making though, is that an RTO decision by a publicly traded company is also a posturing exercise for the market. Most of the remaining 25,000 IT companies in India are privately owned. They don’t need to posture for the market. But their stories also won’t make their way into the headlines.
Being a copycat or thinking differently
I mentioned earlier in this article, that leaders of smaller companies look up to the big boys for inspiration on running their businesses. This is where it can sometimes get tricky. When a big firm that owns real estate, and is also making a statement to the market, makes an RTO decision; that decision is fraught with context. A context that’s dissimilar from most other tech companies.
Context aside, we must appreciate a truism about tech. At its core, tech is a people business. And tech talent is scarce. Companies are struggling to fill tech positions even amid this slowdown. The global competition for tech talent will get worse with time. Top talent is even more scarce. Praveen Gopal Krishnan of The Ken paints a bleak picture. He says that the entire Indian IT industry has 10,000 top-notch engineers. He describes this as a natural limit to tech growth. You could disagree with Praveen, but if you examine his arguments, you’ll realise he’s not wrong by orders of magnitude. So even if you say that this country has 5x the number of skilled engineers Praveen estimates, that’s a huge bottleneck, right there. Everyone will eventually scramble for this top talent.
And there lies the rub. Because of their brand value and their immense geographic spread, the TAMMANA firms will always attract a disproportionate share of top talent. The average small tech firm can’t compete with the pay and the allure of working at say, Meta or Alphabet. If you’re the chief talent officer of a small firm, that’s a big disadvantage to begin with.
Companies like the WITCH firms, also out brand you sometimes. I remember how happy I was to work with one of them, early in my career. You can’t underestimate what it means in India when your parents recognise the company you work for. While these companies aren’t the best paymasters, they have offices in many Indian cities. So they’re attractive to workers in tier-2 cities because working for them means they won’t have to move homes, even if they must go into an office. These businesses are also big and resilient enough to provide workers with a significant perk - job security. So even if the crème de la crème of tech talent goes to TAMMANA; you can’t deny the WITCH’s ability to attract talent.
Salaries in Indian IT compared (in ₹100k)
So you can’t win the talent game against the WITCH and TAMMANA if you play by their rules. The average tech firm in India can’t even compete with them on pay. Therefore, you must look at remote work as a differentiator. Given a choice, most people want to work remotely most of the time. If you have an office-bound way of working then a prospective employee with an offer from the big firms, doesn’t have much incentive to choose you. After all, TAMMANA will probably pay better and the WITCH firms will give you better job security, without the need to leave your city. Both those sets of firms have better brand recall.
Now imagine what would happen if you were location-independent.
You can hire people from anywhere.
You have an employment differentiator. Remote work is just as important as pay to many workers.
This is where the Fortune 5 million can compete with the Fortune 5000. When bigger companies push for a return to the office and the imitators follow, it allows a few, small companies to be differentiated employers. As DHH said in a recent post.
“If you're trying to compete for talent with the likes of Google or Apple, you need all the help you can get, and these companies forcing everyone back into an office might just be your biggest lift. Because for quite a few people, working remotely or not has become the defining characteristic of a job. To the point where many remote workers won't even consider a position that involves a corporate office.”
By the way, everything I told you in this article is an expanded version of what I tell my friends when they ask me how I've been working remotely for so long and what I expect to happen in the future. The short answer is that the RTO news focuses on the big, glamorous companies and not the little fellas who make up most of the industry. Big companies have justifiable business reasons to call people back into the office, and maybe some small companies do, as well. But if some companies are being copycats, they should reconsider their position if they want to compete when wooing talent.
I have, of course, not covered a few other nuances. For example, there’s the idea of “setting the standard”. This is particularly true in the IT services sector, where whatever the big firms do, becomes the accepted standard. Clients demand the same things from smaller service providers. So if the WITCH companies call people back into the office, some clients will expect that smaller firms get their employees to work in an office too. This is regardless of whether presence in an office drives any valuable business outcomes.
There’s also the nuance of how companies behave differently in different geographies. For example, a major American insurance firm claims that more than 80% of their employees are fully remote. Yet, their Indian development centre expects employees to be in the office three days a week. So, there may be an unspoken neo-colonialist mindset, where Indian employees get treated poorly in comparison to their western counterparts. Such geographic discrimination is common.
Nuances aside, IT leaders from smaller firms must stay aware of technologist preferences. Every survey you read, will tell you that your talent pool prefers remote work. In light of that information, you can either take a combative stance against employees or a supportive one. In the long run though, tech companies that can attract top talent will always win against firms that are unattractive to the talent pool. Which company would you like to be?